Powerful Winds (and Wins!) Over The Cliff

Although the “fiscal cliff” was averted late on Jan. 1, 2013, we haven’t heard the last of it. Even as I write this column, the 113th Congress is thrashing out some of the issues that got kicked down the road.

There’s the sequester, a series of automatic cuts in federal spending to reduce the budgets of most agencies and programs by up to 10 percent. It was supposed to have gone into effect with the new year. Instead, the compromise delayed congressional consideration of the sequester for two months.

Also, on the same day the fiscal cliff deal was done, federal borrowing had just passed the $16.394 trillion debt ceiling, leaving the Treasury Department to employ “extraordinary measures” to cover, at most, about two months’ worth of borrowing. And the current continuing budget resolution to keep the government funded expires on March 27, so that is another area where action is needed soon. In addition, it is widely expected that Congress will consider rewriting the tax code in 2013.

Whatever happens, you can be sure that the National Electrical Contractors Association and politically savvy NECA members will be right in the thick of it. With 13 new senators and 84 new representatives in Congress, NECA’s Government Affairs team will be working harder than ever to introduce our industry’s concerns to all the legislators, and we’ll continue to be active on all legislative and regulatory issues that affect electrical contractors.

“Continue” is, of course, the key word here; most of our victories in government affairs were hard-won through our consistent outreach and efforts that sometimes spanned years. That NECA and our industry achieved several wins in the fiscal cliff deal testifies to this.

Consider that NECA had been educating Congress on the need for permanent estate tax reform for more than a decade. Finally, with passage of the fiscal cliff measure, most of the temporary estate tax provisions enacted in 2010 have been made permanent. The top rate increases from 35 percent but will be permanently fixed at 40 percent, with a $5 million exemption for each spouse. The thresholds will also be indexed to inflation. The president had called for increasing the rate to 45 percent and lowering the exemption to $3.5 million.

NECA had been seeking a permanent fix to the alternative minimum tax (AMT) even longer. Under the fiscal cliff deal, the AMT will be permanently adjusted for inflation to avoid raising taxes on the middle class.

In another series of NECA wins, the deal extends the availability of tax credits for investment in wind energy, electric vehicles, energy-efficient new homes, energy-efficient appliances, and the like. The idea did not simply dawn on Congress late last year. NECA and allies have been pressing for such incentives, and their extension, for a long, long time.

I also count it as a major win that completion of the fiscal cliff deal settles some uncertainties so electrical contractors can stop worrying and move on to focus on creating jobs and growing the economy. I think that applies to all types of businesses.

It’s clearly true in the wind-power industry. Wind set a new record in 2012 by installing 44 percent of all new electrical generating capacity in America, according to the Energy Information Administration, compared to 30 percent for natural gas and lesser amounts for coal and other sources. Nevertheless, fiscal cliff woes hit the industry hard.

Uncertainty about extension of the tax credit had caused thousands of layoffs over the past several months as manufacturers of wind turbines and related components idled factories due to a dearth of orders from potential customers, who were also paralyzed by uncertainty. Half the American jobs in wind energy—37,000 out of 75,000—and hundreds of U.S. factories in the supply chain would have been at stake had the tax credit been allowed to expire, according to a study by Navigant Consulting.

The extension of the wind-energy production tax credit, and investment tax credits for community and offshore projects, will allow continued growth of this energy source. The extensions cover all wind projects that start construction in 2013. Companies that manufacture wind turbines and install them sought that definition to allow for the 18–24 months it takes to develop a new wind farm. The development and operation of a single large wind farm can create more than 1,000 jobs.

An obvious lesson to take away is that now is a great time for electrical contractors to seek and develop business in renewable-energy markets. (And, I do mean right now, while the window of opportunity is open.) Of course, there’s also a lot to be said about the importance of government affairs efforts that are carried out consistently and without letup!